I’m Neal Frankle, Certified Financial Planner™. Credit problems are a serious business. In fact they changed my entire family life when I was 16. This site is here to help you repair your credit without getting ripped off. Read my story.

Why It’s So Hard to Eliminate Credit Card Debt

There are all kinds of strategies when it comes to eliminating credit card debt – entire books have even been written on the subject.

But anyone who has tried to do it knows it’s much easier said than done. After all, that’s why so many people struggle with huge amounts of credit card debt.

The reasons that it’s so difficult to eliminate credit card debt are the same as the ones that get people buried deep in credit card debt in the first place.

But maybe that is where the solution is.

By looking at those reasons you will understand the true obstacles you face in trying to eliminate credit card debt, and develop a workable strategy to pay them off. Let’s dig in.

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Credit Cards are Too Easy to Use

A major reason why it’s easy to run up credit card balances is because credit cards allow you to get stuff regardless of whether or not you have the cash to pay for it.

There is a total disconnect between your wants and resources.

What makes the arrangement even more complicated is the fact that you have the option to either pay off your balance in full each month, or to make a partial payment and pay the rest in future increments.

That second option – making partial payments – is what ultimately causes the problem for most people.

The fact that you can make $500 in purchases on a credit card in one month, but only have to repay $25 the next month, creates the perfect storm of unpayable debt.

Credit card companies practically invite you to do this, by assessing minimum monthly payments that are designed mostly to cover the interest on the account only, without materially paying down the principal.

Those minimum payments are typically no more than 2% of the total amount due, or only slightly higher.

It’s far too easy to carry a $10,000 credit card balance, when the monthly payment is only $200. It’s the perfect arrangement for someone who is looking to use credit as an extension of their paycheck.

Using Credit Cards in Place of an Emergency Fund

That’s the rough equivalent of saying that nearly 2/3 of households in the US have no emergency savings.

So what do all those millions of households do when confronted with an emergency? Most likely, the first source of emergency funds are credit cards.

That explains not only why so many people are carrying high credit card balances, but also why they are unable to pay them off.

Emergencies are bound to come, and if you have no emergency savings to cover them, you’re practically guaranteeing that you will turn to credit cards when one strikes.

And over a period of years, credit card balances pile-up with each emergency.

Absent any cash savings, the situation can never improve.

High Interest Rates Make High Credit Card Debt a Losing Battle

Though you may be able to get a mortgage at 4% or a car loan at 2%, you will probably pay a minimum of 10% on a credit card, and that’s only if you have perfect credit. Many credit cards have much higher interest rates.

What makes this even more complicated is the way credit card companies entice consumers with 0% transfer offers.

The consumer is invited to transfer balances from other credit cards to the new card, and no interest will be charged during the interest rate grace period.

But the fundamental problem is that grace periods are always temporary.

They may last six months, nine months, 12 months, maybe as long as 18 months, but they will come to an end.

And when they do, the on-going rate of interest is often something higher than 20% per year.

If you are carrying too much credit card debt with interest rates of 10%, 15%, 20% or more, getting those card paid off will be an uphill battle.

And that’s not to mention the fact that it means that you will always pay 10% to 20%+ extra for what ever you buy with the cards.

If it seems hopeless, that’s because that’s the way it’s set up.

You go into debt, based on low monthly payments, then you’re soon stuck there by high interest rates and by adding additional purchases as your cash flow gradually begins to dry up with a series of ever increasing credit card payments.

Calling a Halt to the Credit Card Merry Go Round

Credit cards work best in the very beginning, when your balances are low, and the monthly payments are almost nonexistent.

Pressure begins to mount as balances rise, and interest rates and monthly payments also increase.

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